The case of willow court management (1985) Ltd v alexander  0290 UKUT (LC)(“Willow court”) in the Upper Tribunal (Lands Chamber) dealt with unreasonable conduct during litigation in England.
Rule “13” Tribunal Rules 2013
Rule 13 of the Tribunal Procedure Rules 2013 (“Rules”) may give rise to financially damaging consequences. Under Rule 13(1), where a Tribunal finds that:
(a) costs have been incurred as a result of any “improper, unreasonable or negligent act or omission on part of any legal or other representative which is unreasonable to expect that party to pay”, the F-tT may order payment of wasted costs.
(b) a person who has acted: “unreasonably in bringing, defending or conducting proceedings”, the F-tT may order payment of unreasonable conduct costs.
Such an award and/or determination under Rule 13 is not subject to any capping whatsoever.
Case law update:
The Willow Court case involved a purpose built block of ten flats. There was a tripartite lease. Mrs Alexander: (1) was a lessee (2) owned 50% of the shares in the freehold company and (3) owned one tenth of the shares in the management company.
The management company sought payment of service charges. Mrs Alexander’s defences centred on the validity of a retrospective certificate (which was a condition precedent to liability for the charges under the lease), whether the authority of the Directors was duly given to approve the service charges and whether the management company could prove it had incurred relevant costs of expenditure going back to 2007.
For the purposes of this article it would not be possible to discuss the details of the First-tier Tribunal (Property Chamber) (“F-tT ”) determination.
The Upper Tribunal’s determination of Willow Court propounds a three stage systematic approach that should be taken in such applications:
“Has the person acted unreasonably”? At this stage, there is a high threshold. The UTLC said that “if there is no reasonable explanation for the conduct complained of, the behaviour will be adjudged to be unreasonable, and the threshold for making of an order will have been crossed”.
“Should an Order be made?” If the party has acted unreasonably, the Tribunal has a discretion whether to make an order or not. There would be focus on the nature, seriousness and effect of the unreasonable conduct, which will be an important part of the material to be taken into account.
“What should the order be?” If the above two stages above are satisfied, it does not necessarily follow there will be an order for costs. Importantly, the order need not be confined to “attributable to the unreasonable conduct”.
It seems the natural course of events will mean that fewer applications will be made under Rule 13 and they should not be routine applications. Willow Court elucidates that Rule 13 may be financially destructive to a party (as Rule 13 costs are uncapped), but the applicant must satisfy the three stage test before getting any order.
Alternative dispute resolution may be ever so relevant in disputes, especially in a time where cost consequences may be open ended. LEASE now offers a mediation service.